It’s that time of year again, you should start receiving a host of informational tax statements from different institutions. These institutions can include banks and investment brokerages as well as any other place you did business with during the previous year.
This form reports different type of income from self-employment earnings, interest and dividends, government payments and more that have various specific versions to each source. This is the document that many taxpayers receive, here are four important things you should know about the most common versions of Form 1099.
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Not All 1099 Forms Are the Same
Generally, businesses must issue the form to any payee (other than a corporation) who receives $600 or more during the year. That’s just the basic threshold rule, but there are many exceptions to the rule. There are many varieties. There’s a 1099-INT for interest; 1099-DIV for dividends; 1099-G for state and local tax refunds and unemployment benefits; 1099-R for pensions and payouts from your individual retirement accounts; 1099-B for broker transactions and barter exchanges; 1099-S for real estate transactions, etc. There are many categories, but the Form 1099-MISC (for miscellaneous) has the most questions and covers the biggest territory.
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The IRS Gets A Copy Too
Any Form 1099 you received also goes to the IRS. The deadline is January 31st for sending the forms to taxpayers. The IRS computers match income and other information on these forms to information on your return.
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It’s Not Always Accurate
When the Form 1099 you receive contain a mistake, clerical error or discrepancy tell the payer immediately. There may be time for the payer to correct it before sending it to the IRS. If the payer has already filed the incorrect form to the IRS, ask the payer to send in a corrected form.
If the IRS sends you a notice based on incorrect information, reply in writing immediately and explain the problem. Keep copies of all correspondence with the IRS.
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You Must Report Income Even If You Don’t Receive Form 1099
There are chances that you may not get Form 1099 because your payer could have not sent the form. The income amount you received may be under the limit for the form requirements, or it may meet some other exception. But, regardless of the reason, you must report and pay the tax on your income.
If you need more clarification if you need to issue 1099 to your contractors, you can contact us today at admin@fas-accountingsolutions.com or 832-437-0385.